Inside the big switch: the iPod and the future of Apple Computer

Confused by IBM announcing dual-core and low-power PPC 970s a month after …

If you've been following the Apple-to-Intel transition, you're going to want to read this whole article. Why? Because I'm going to do something that I almost never do: spill insider information from unnamed sources that I can confirm are in a position to know the score. Note that this isn't the start of some kind of new trend for me. It's just that all this information that I've been sitting on is about to become dated, so it's time to get it out there.

As I said in my previous post on the 970MP and FX unveiling, the new PowerPC processor announcements from IBM raise a number of questions about timing, like, when will these parts be available? how long has IBM been sitting on them? why the apparently sudden leap in performance per watt on the same process after a year with so little improvement?

The announcements also raise serious questions about why, if these great parts were just around the bend, did Apple really jump ship for Intel? Was it performance, or performance per watt, as Jobs claimed in his keynote speech, or were there other, unmentioned factors at work?

I have some answers to those questions, and I'll pass them along below. However, those answers come complete with their own vested interests, so feel free to interpret them as you will.

First, let's talk about the broken 3GHz promise. It's apparent in hindsight that 3GHz on the 970 was never going to happen on a 90nm process without lengthening the 970's pipeline, which is a fairly significant change. Who knows why IBM promised Jobs 3GHz? All I do know is that despite the objections of some within IBM the company tried to hit that target without the needed pipeline change, and missed it.

The laptop G5, which is the long-rumored and now-announced 970FX, has supposedly been ready to go into an Apple laptop since at least early last month. And for what it's worth, yes, Apple was offered the Cell and other game console-derived chips. In fact, IBM routinely discloses its entire PowerPC road map to Apple, so pretty much anything PPC that IBM puts out is not only not a surprise to Apple, but it's potentially available for Apple's use.

So why didn't Apple take any of these offers? Was it performance, as Jobs claimed in his keynote? Here's something that may blow your mind. When Apple compiles OS X on the 970, they use -Os. That's right: they optimize for size, not for performance. So even though Apple talked a lot of smack about having a first-class 64-bit RISC workstation chip under the hood of their towers, in the end they were more concerned about OS X's bulging memory requirements than they were about The Snappy(TM).

One of the major factors in the switch was something that's often been discussed here at Ars and elsewhere: Apple's mercurial and high-handed relationship with its chip suppliers. I've been told that the following user post on Groklaw is a fairly accurate reflection of the bind that Apple put itself in with IBM:

and I can tell you, there's a very good chance that they outsmarted themselves into a "no bid" response from IBM.

Part of Apple's longstanding complaint against IBM was that Apple would announce a new computer with a new IBM processor, sales would skyrocket, and IBM wouldn't have adequate supply. We've all heard the story. Here's my take:

Apple negitiate for a new processor chip. Being Apple, they want "most favored customer" treatment, with fab-fill margins for the vendor. What's more, they want this for what amounts to a custom processor chip, so any oversupply will just sit on the shelf until Apple decides they want them, and sometimes Apple will let them sit a while to see if they can get a price break -- it always pays to remind the world that one is, after all, the Steve Jobs.

With terms like that, custom chip vendors only start as many lots as the customer contracts to accept right off the line. Apple, not exactly rolling in cash, isn't going to highball that estimate. In fact, they play it conservative and only order a small startup batch. The rest follows, of course: the product sells, Apple orders more to cover the demand, and IBM tells them that processors have a 6-month lead time.

Apple complains publicly about IBM (does this sound like anyone we know?) IBM, being grown-ups, doesn't say anything that might be perceived as negative about a customer.

Lather, rinse, repeat.

Well, time goes by and IBM has other customers who actually pay up front for custom designs and who don't insist on having IBM tailor their product roadmap around a few million units a year. Apple again demands that IBM dedicate their CPU design teams to making an Apple special that will never generate much revenue. If IBM won't play, Apple will go to Intel.

IBM does a Rhett Butler, and the rest is history. Note that you aren't hearing one way or the other from IBM on this story.

Class bunch, IBM.

Apple has been pulling these stunts for a long time, as anyone who followed the company's relationship with Motorola knows. Compare the quote above to the following selection from a five-year-old Paul DeMone article describing Apple's dysfunctional relationship with Motorola and the reasons for Motorola's long clockspeed stagnation:

In many ways Apple is the author of its own misfortune. Years of work and billions of dollars of investments are required to design, manufacture and maintain the competitiveness of a family of microprocessors for the desktop computer market. Time and time again Apple has changed business strategies abruptly, only to reverse itself again a short while later in ineffective attempts to stem its gradual but consistent losses in market share. The PowerPC semiconductor partners, Motorola in particular, has written off hundreds of millions of dollars in losses caused directly by the erratic actions of Apple Computer, such as encouraging and later crushing a nascent market for Macintosh clones. The mercurial nature of its primary customer, combined with its minuscule and generally diminishing share of the desktop computer market, have meant that at least the last two generations of PowerPC processors have been designed primarily with embedded control, and more recently, digital signal processing applications in mind. This has left Apple in the position of only being able to differentiate itself on the basis of curved system form factors and translucent plastic.

So this behavior has been going on for years and has spanned multiple CPU suppliers. The only thing that's different now is that the Mac is no longer the foundation for Apple's future growth.

For the real reason behind the switch, you have to look to the fact that it's the iPod and iTMS—not the Mac—that are now driving Apple's revenues and stock price. As I stated in my previous article on the switch, Apple is more concerned with scoring Intel's famous volume discounts on the Pentium (with its attendant feature-rich chipsets) and XScale lines than it is about the performance, or even the performance per Watt, of the Mac.

It's critical to understanding the switch that you not underestimate the importance of Intel's XScale to Apple's decision to leave IBM. The current iPods use an ARM chip from Texas Instruments, but we can expect to see Intel inside future versions of the iPod line. So because Apple is going to become an all-Intel shop like Dell, with Intel providing the processors that power both the Mac and the iPod, Apple will get the same kinds of steep volume discounts across its entire product line that keep Dell from even glancing AMD's way.

If you think XScale is too powerful for the iPod—it's used in powerful color PDAs—then you're not taking the device seriously enough as a portable media platform. The XScale is plenty powerful enough to do video playback, and I have reason to believe that Apple is currently working on a video iPod to counter the Sony PSP. (My guess is that we might even see it in time for Christmas.) When the video iPod hits the streets, Apple will have an iPod product that plays each of the media formats (music, pictures, video) represented in its iLife suite.

The cold, hard reality here is that the Mac is Apple's past and the iPod is Apple's future, in the same way that the "PC" is the industry's past and the post-PC gadget is industry's future. This transition mirrors the industry's previous transition/expansion from the mainframe to the networked commodity PC—a transition that is still ongoing in some sectors of the market. Of course the PC will stick around, but as the hub of a growing and increasingly profitable constellation of post-PC gadgets. It's a shame that Steve Jobs can't be upfront with his user base about that fact, because, frankly, I think the Mac community would understand. The iPod and what it represents—an elegant, intuitively useful, and widely appealing expression of everything that Moore's Curves promise but so rarely deliver—is the "Macintosh" of the new millennium. There was no need to put on a dog and pony show about how IBM has dropped the performance ball, when what Jobs is really doing is shifting the focus of Apple from a PC-era "performance" paradigm to a post-PC-era "features and functionality" paradigm.

UPDATE: If you read all the way to the bottom of this article, and you think that my basic thesis is that "the Mac is doomed and Apple is planning to quit selling personal computers," read again. I already made my point about Apple's shift in focus from the desktop PC (as exemplified by the Mac) to the post-PC gadget (as exemplified by the iPod) in a previous article, where it didn't occasion nearly as much contention from readers.